The British Business Bank has committed £40m to alternative lender Harwood Private Capital’s second fund, as it seeks to increase the supply of growth capital to smaller UK businesses.

The government-backed development bank said the investment supports the first close of Harwood Private Capital UK Fund II, which has secured £120m in total commitments across its debt facility and co-investment vehicles.

The fund backs smaller and lower mid-market private companies through expansion, acquisitions and shareholder transitions.

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“Harwood has developed a strong track record of providing tailored financing solutions to UK small and medium-sized enterprises, particularly those that have not been backed by private equity,” said Adam Kelly, managing director for debt and regional funds at the British Business Bank.

“Our commitment will help increase the availability of growth capital for businesses, support economic growth and create jobs throughout the UK.”

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The deal takes the bank’s total commitment to Harwood to £75m. It put £35m into the lender’s first fund, HPC UK SME Fund, in 2020.

Harwood Private Capital is the credit arm of Harwood Capital Management. Its first fund has backed businesses in sectors including digital technology, clean energy supply chains, manufacturing and tourism, among them Welsh marina operator Western Marinas.

“The £120m of committed capital allows us to keep providing the flexible, partnership capital these businesses need to grow, make acquisitions and manage ownership transitions on their own terms,” said Haseeb Aziz, managing partner at Harwood Private Capital.

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